McClatchy Reports Third Quarter 2018 Results

McClatchy (NYSE American-MNI) reported net income in the third quarter of 2018 of $7.0 million, or $0.90 per share. Results in the third quarter 2018 include after-tax non-cash impairments on newspaper mastheads of $12.7 million. In the third quarter of 2017 McClatchy reported a net loss of $260.5 million, or $34.11 per share that included after-tax non-cash charges of $230.9 million recorded in the third quarter of 2017. The 2017 non-cash charges related almost solely to a non-cash deferred tax valuation allowance and, to a minor extent, after-tax non-cash impairments on newspaper mastheads and certain equity investments.

The company reported an adjusted net loss of $23.8 million, which excludes severance and certain other items in the third quarter of 2018, compared to an adjusted net loss of $2.6 million in the third quarter of 2017.

Craig Forman, McClatchy’s president and CEO, said, “This quarter both our total digital and digital-only advertising revenue surpassed our print newspaper advertising revenues. While headwinds in print newspaper advertising remain strong, this trend in our digital revenue signals that our relentless focus on digital transformation continues to be an effective strategy for sustainability and future growth.

“The digital transformation not only includes advertising, but how we deliver local journalism that is essential to our communities and to our subscribers. We launched SportsPass, a sports-only subscription in select markets, which is an important illustration of the innovative approach we are pursuing to offer products that are tailored to customer needs and the flexibility that we have gained with our strategic investment in technology. We ended the third quarter with 137,000 digital-only subscribers, which represents growth of almost 48% compared to the third quarter last year. We are pleased that our overall growth in digital subscriptions exceeds the outlook we provided at the beginning of the year.”

Third Quarter Results

Total revenues in the third quarter of 2018 were $191.1 million, down 10.1% compared to the third quarter of 2017. The rate of decline in total revenues in the third quarter was in line with the first quarter and the first half revenue results this year.

Total advertising revenues were $95.1 million, down 17.5% compared to the same period last year. Digital-only advertising revenues grew 8.9% and total digital advertising revenues, which include digital-only advertising and bundled digital and print advertising, increased 1.4% compared to the same quarter last year. As previously reported, total digital advertising is now greater than print newspaper advertising. In the third quarter of 2018, digital-only advertising surpassed print newspaper advertising revenues for the first time. These results were aided by momentum gained in the company’s excelerate® digital agency and video efforts. Specifically, video views and revenues each grew by approximately 47% compared to the third quarter of 2017.

Direct marketing declined 23.6% compared to the third quarter of 2017. Direct marketing continues to be negatively impacted by the soft print advertising environment, specifically the grocery and retail space.

Audience revenues were $84.0 million, down 3.6% in the third quarter compared to the same period in 2017 reflecting declines in print subscribers. However, the trend in audience revenues improved 2.0 percentage points sequentially over the first half of 2018 reflecting continued growth in digital audience revenues. Digital-only audience revenues were up 52.8%, due largely to digital-only subscriber growth. Digital-only subscribers grew 47.6% to 137,000 as of the end of the third quarter compared to the same quarter of last year.

Average monthly total unique visitors to the company’s online products were 60.5 million in the third quarter of 2018.

Revenues exclusive of print newspaper advertising accounted for 81.7% of total revenues in the third quarter of 2018, an increase from 76.2% in the third quarter of 2017.

Results in the third quarter of 2018 included the following items which are presented in the accompanying reconciliation of net income to adjusted net loss:
•Net gain on extinguishment of debt related to the debt refinancing in July;
•Non-cash impairment charge related to the write-down of newspaper mastheads;
•Severance charges;
•Non-cash credit to the company’s tax provision;
•Gain on sale of CareerBuilder investment; and
•Accelerated depreciation and other miscellaneous costs.

Adjusted net loss, which excludes the items above, was $23.8 million as compared to $2.6 million in the same period last year. Adjusted EBITDA was $19.0 million in the third quarter of 2018, down 52.5% compared to the third quarter last year. Operating expenses were up 1.0% due in part to tariffs on newsprint that negatively impacted both prices and supplies, while adjusted operating expenses, which exclude non-cash and certain other charges, were flat in the third quarter of 2018 compared to the same quarter last year and include gains on certain asset sales in the 2017 quarter. Excluding the impact of real estate gains offsetting expenses in the third quarter of 2017, operating expenses were down 3.4% (A discussion of non-GAAP measures and the reconciliation to the comparable GAAP measures are provided below).
more detail at: http://investors.mcclatchy.com/phoenix.zhtml?c=87841&p=irol-newsArticle&ID=2376544

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